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Notice to Members 98-40

Nasdaq to Incorporate Trade Acceptance and Reconciliation Service into Automated Confirmation Transaction Service

In the third quarter of 1998, The Nasdaq Stock MarketSM (Nasdaq®) will discontinue the Trade Acceptance and Reconciliation ServiceSM (TARSSM) and will incorporate its functionality into the Automated Confirmation Transaction ServiceSM (ACTSM). ACT will be significantly enhanced as part of this ACT/TARS migration project. The key features are as follows:

ACT will electronically capture all As-Of paper Form T entries for a period of up to one year.

ACT will provide a new Step-Out transaction indicator to allow members to flag Step-Out clearing entries that are submitted into ACT for comparison, clearance, and settlement through the National Securities Clearing Corporation (NSCC).

ACT will allow for a new Give-Up Lock-In feature to reduce the number of entries required to automatically compare trades between executing and/or introducing brokers and their Give-Up correspondents.